Bank loyalty programs are crucial business tools that can drive customer engagement and revenue, and also enhance customer lifetime value. Yet, there remains masses of untapped potential for banks to exploit, especially around the use of data and personalization.
For this episode of the Loylogic Podcast, we are joined by Paul Wallis, Director of Growth at Epsilon, to explore the benefits that loyalty and rewards programs – when done well – can deliver for banks and how program leaders can overcome the challenges of delivering effective whole bank loyalty programs.
Key topics discussed include:
1. Bank loyalty programs today (2:05 to 8:10)
- Why bank loyalty is still in its infancy, the need for much greater personalization in loyalty and rewards, especially given the huge volume of data banks posses.
- Global trends in banking and why this is driving the ever-greater need for effective loyalty programs.
- What the best bank loyalty programs have in common.
2. Attracting and retaining customers with loyalty programs (8:11 to 15:42)
- How banks – or any financial institution for that matter – can ensure they’re developing the right loyalty program strategy for their business to meet customer demand for innovative loyalty schemes.
- Overcoming the main operational challenges brands face while executing their loyalty programmes.
- The big talking point…data…and why effective use of the information that banks hold on their customers is the best way forward for any loyalty platform to power engagement.
- How does this effective use of data play into the cost centre vs revenue generation debate?
3. Bank loyalty programs in UAE & Saudi Arabia (15:43 to 19:48)
- How global trends in bank loyalty are playing out across UAE and the Kingdom of Saudi Arabia
- The region-specific factors loyalty program managers need to consider while implementing loyalty programs in the region.
- The regulations, issues and requirements loyalty program managers need to consider when implementing loyalty programs in this region.
Listen now...or read below
The podcast can be enjoyed here, or by heading to the Loylogic Podcast channels on Spotify, Apple Podcasts and wherever else you listen to your favourite shows. A transcription of this latest epiosde can also be found below.
(2:05): How are banks across the world currently using loyalty programs as a strategic tool to drive success?
From what I see, I think bank loyalty is in its relative infancy. And I see that across the world, not just in the Middle East. When I see the amount of data a bank has about me, it knows my spending habits, it knows an awful lot more than most people do, probably than my family, I still see that I'm not receiving personalized offers, and rewards live statically on web pages. I don't see that engagement yet.
Typically, I'm not changing my bank every week. I've got this automatic loyalty there. And I think there's a real opportunity for banks to tap into that loyalty and be able to cross-sell and upsell me lots of different things. I never understand why I've got my current account in one place, I've got a car loan somewhere else, a mortgage with somebody else. I think, if banks get it right, there's a real opportunity.
I feel that some banks are doing a particularly good job, but then there are others that really need to play catch up. When I've spoken to people, they've got their own challenges internally, but I do think if you can break those internal challenges, there's a really good opportunity for the banking world.
(4:04): I guess what you're saying there is all the more important given that the banking landscape has changed dramatically since COVID. What are the global trends that are really driving the need for loyalty?
Obviously COVID drove the change towards digital banking. And then of course, because everything's going digital, fintechs are seeing opportunities to offer more user-friendly banking. Then we've got the open banking adoption coming in. So, you're seeing a lot more use of data, data and AI, to reduce fraud and improve customer experience. You've got new asset classes coming into the business as trends to explore and the blockchain and crypto central banks are exploring digital currency to make transacting more efficient, as well.
I think all of these trends are really dramatically changing the banking from a physical, quite slow process with expensive charges, to ones where banks are really going to need to be sharp in terms of what they offer to their customers to retain their business.
(5:25): That makes sense, and therefore, are we seeing more banks turning to loyalty programs? And if so, what benefits are they hoping to extract from them?
For me, whenever I've done banking loyalty programs in the past, or some sort of reward platform, the key drivers have been banks always wanting more transactions, and obviously being able to gain from cross border FX when people are traveling. But really, when I talk to banks now around loyalty, they're looking for better retention, and they're looking for more engagement with their customers.
Key to that is the ability to cross-sell other banking products, it's not just about running a current account anymore, really, the bank should be able to own the household finance. We see the super apps coming along as well to also disrupt that business, simple buy now, pay later, modules that plug into shopping platforms are all taking away from these banks. I think, if banks can control it from the data that they have, again, I think that's one of the reasons they can turn to loyalty programs. I for one don't need to sign up as my bank has already got me as a customer. It'd be very easy to switch me on to my bank to be loyal if there was another incentive there.
(6:47) So we're talking very much about kind of whole of bank loyalty here? And are there any examples of banks who are doing this well?
Looking around, I think I've seen a few examples of where loyalty is used quite well in the banking industry. One of them is Citibank, and the other one is JP Morgan. They kind of have a fairly common practice, but it seems to be working well for those guys. Their rewards enable points earning across a range of banking services, which can be turned into cash or redeemed at participating merchants. It's quite simple and straightforward, but of course, you're earning points whenever you do something at the bank, which can be exchanged into real money. So, I think as a start point, what those guys are doing is really good.
I think Citibank, when I last checked, they've got 23 million members on their rewards platform across the world. Of course, it's in multiple locations and of course, it's a large base of people. But 23 million people enjoying the platform is not to be sniffed at. And then moving from there, I think you can bring a lot more of the new technologies in to drive loyalty even further, but I like what they're doing as a start point, they're doing some good stuff.
(8:11): That leads us nicely on to the kind of next chapter it really of today's discussion. And I'll start by kind of sharing that the findings of a KPMG study that reported that 61% of customers found it extremely important or very important for their bank to focus on coming up with more innovative ways of rewarding loyal customers. Given this, how can banks or any financial institution or brand for that matter, ensure they're developing the right loyalty program strategy for their business?
Again, it comes down to the fact that they're blessed with data if they want to make their rewards for their loyal customers truly rewarding. They know for me, if they look at my profile, I like cars, I like golf. If they just offered me those things, I would do as much as I could, in order to make my lifestyle more fun, more enjoyable.
I was talking to a couple of the card issuers and they're going down the experiential route, in terms of what they want to offer for their customers and, and there's a whole big piece around money can't buy rewards. Some of the banks and financial institutions sponsor big events, so they can get you into places. I think Marriott do it quite well with their Bonvoy reward platform. You can go to see Manchester United play or the Formula One.
I think banks need to really focus on doing things that are ultra personal to the individual, but also bring in some of the experiential stuff. They've got these massive sponsorship deals around the world and so can leverage their relationships to provide some of their customers with true money can't buy experiences. I think that's where that's where they should be going, and they can really win from that type of customer engagement.
(10:04) I think you could probably argue that people would pay you to go and watch Man United at the moment! Moving swiftly on, what are the main operational challenges that the brands face while executing their loyalty programs?
For me, the competitive landscape of loyalty now is crazy. Everywhere you go, there's a loyalty platform or some scheme in place, whether it be at brand level, bank level, or shopping mall level, and people get confused. They've got points going all over the place, they've got app fatigue, as well. With all of this confusion in the actual sort of loyalty marketplace, engagement becomes difficult. And then, of course, all of these other challenges around the data management, the tech integration, the education of the team, building personalization, communication, running costs of the business, potential fraud, fraudulent activities, they exist on platforms. There are heaps of operational challenges, and loyalty shouldn't be taken on lightly, because you're trying to build that relationship with a customer over the long term.
So, whenever you enter into the space, you've got to do it right. Otherwise, it can take years to recover from these things. It's a big thing to embark on, if you're going to do it properly. And often, people miss out those things, going for the simplest way, if somebody downloads, I'll give them a simple reward per transaction and things like that. Loyalty needs to be really well thought through and driven, with the right strategy built at the front end of what people want to achieve, what KPIs they need to measure against, in order to build the platform.
(12:14): I want to pick up on one of one of the areas that you've mentioned there, which is data. Data management is a hot topic, so how can any loyalty program manager ensure that the data has been managed in the right way?
As we move forwards in the world, I think as we see cookie deprecation, and all of these things, and the influx of Web3, and things like that, data is going to become more in the control of the individual, as opposed to just being used across the board by anyone and everyone. Data control, coming back into the hands of the individual, will be a good thing.
And then I think it will be down to the brands to ensure that they're able to build a trusting relationship with their clients, that clients will hand over their data to them, because they know the brand or institution that they're dealing with is actually giving them value back. Where I work now in Epsilon, we truly believe in value-led loyalty as a way forward. And of course, that includes Data Trust, as well as one of those things.
(13:30): Taking that to the next stage, the ability to deliver those personalized golden moments through rewards, helps to build that trust and show that it's an intelligent use of data?
Exactly, yes. If you personalize properly, you'll be receiving things that are relevant to you, and not just receiving emails and pressing delete. Brands spend a lot of money sending out hundreds or thousands of emails and to have 2% open rates. It doesn't it doesn't make any sense, right? It's just a waste of everybody's time. So as soon as this can happen, I believe that better for everybody.
(14:09): The next question on data is how does the effective use of data play into the whole cost center versus revenue generation debate?
If you get your data strategy right, and I'd always encourage people before they embark on loyalty to ensure that they've first got the data part right, their data pools under control, if you wish, because so many times people will start trying to build programs using fragmented data, and it creates all sorts of headaches. So, even before you start to do your loyalty strategy, it's always good to get your house of data in order if you wish.
But, of course, there's an upfront cost associated with building your data strategy. But once you've got it, there's plenty of ways in which you can start building in monetization off the back of the of the data, and that's both from an internal efficiency perspective, based on the insights that you have known how to adapt the program, knowing what type of rewards to do, and then being able to use that data to the benefit of the customers. And then, you've got a pool for the cross-sell and upsell of the business, which then is a contributing factor to the ROI of your loyalty program.
Loyalty is not built overnight. So those ROI calculations need to stretch over, you know, a good three years, but good loyalty programs will run into multiple years of engagement, if done well and data is used correctly, of course.
(15:43): So, Paul, you have extensive experience of delivering successful loyalty programs in markets such as the UAE and Saudi Arabia and I want to focus on that region for a few minutes. How are global trends in bank loyalty playing out across the region? And is there a move towards loyalty program adoption?
There is. Publicis acquired the Epsilon platform in 2019, came to the UAE, really, in 2020, and since we've seen a huge increase in enquiries for loyalty programs in the financial sector. Typically, before, it was very heavily driven on retail. But now we're seeing a move away with banks from a traditional 'just give him rewards' to actual loyalty. That goes across most of the region, and especially in the Kingdom, where there's a lot of growth accelerating. UAE has been fairly stable for a long time. But that being said, there's a lot of digital banks that have come in as well. So yeah, there's lots of new and exciting opportunities across the region.
(17:00): What are the local trends and opportunities?
On the large scale, we're seeing huge trends in digital transformation. This has taken a massive hold in most of the regions, and certainly from the consultative side of the business. They're driving forwards a lot. And people want to transform with super apps, they want to bring in fintechs to their business. They want to do so many things, Web3, there's so many new digital initiatives. On a country level, they're embracing digital transformation as well. And to that extent, you know, personalization is becoming very important.
It's really interesting to look at the mix of people in a region like Dubai, or the change in population demographics. In Saudi, 65% of the population that are Gen Z. So, you've got a very young audience, digital savvy, and they want things like gamification and Web3. In the region, everybody loves exclusive rewards, the VIP treatment and all of those things, but then we have to bear in mind that we need to keep it aligned with Sharia compliance, and Islamic finance and things like that. We have all these different cultural pockets that we need to be respectful of, but the trends are there, the mobile wallet integrations, AI and chatbots etc. It's really exciting. And you know, of course, we've got an audience that's wanting to embrace the technology changes.
(18:48): Excellent. So where do you see the future of bank loyalty across the region?
I think we'll see some of the best loyalty programs come out. There are some pretty unique things in regions here, where you see families that own multiple businesses, so shopping malls, car dealers, banks, everything, real estate, all falls under one umbrella, you know, whilst their individual brands and P&L is on their own. Ultimately, they report up into big family conglomerates. They're in a unique position to create apps that go across or touch all different parts of people's lives. So, from there, they're able to build ultimate loyalty. And if they do it well. they'll keep customers within their ecosystem. If I was one of those companies, I'd really be embracing what I could do with loyalty.
(19:49): To conclude our discussion, what key takeaways can you share that would provide bank loyalty program managers the best insights from what we've discussed today?
From my perspective, there's a shortlist. I like to think of it as bullet points. So, the first thing when you come to the region, and you get involved in loyalty, cultural sensitivity, important understanding of all the local regulations, because they differ by country, although you might be doing Middle East wide programs.
Localization is the key, being able to localize like in the television industry. I refer to that because I used to work in it. But when I see the international platforms that come here, versus the local platforms that have set up, the local platforms are doing and performing better, because it's localized content. And people like to work in places they're familiar with. Then there's the personalization, ensuring everybody has a unique tailored experience. Data security, payment, diversity, collaboration with partners. You're not just in one ecosystem, you're able to use your points as a currency in in many partners. Exceptional customer service and feedback is critical. And of course, keeping an eye on the competition.
For me, in summary, when I talk about loyalty, especially under the Epsilon umbrella, our remit is that we always want to capture a share of a customer's heart, a share of mind, and of course, a share of wallet. And we think if we can capture those three things, we can build the best loyalty programs.